Sir Mervyn King sees 'steady, slow recovery' during 2012

Sir Mervyn King claimed that the UK's economy will make a "steady, slow
recovery" during 2012, as he admitted that the Bank of England must
take a "share of the responsibility" for the financial crisis.

"Our reports that we get from around the country... it's a patchy picture, but there are indeed signs of a recovery coming," said the governor of the Bank of England on BBC Radio 4's Today this morning. "So I think a reasonable view would be that we would start to see steady, slow recovery coming during the course of the year.

"If it had not been for the squeeze on real take-home pay being exacerbated by the rise in energy and food prices then I think we would have seen some growth."

The governor was responding to a radio lecture given last night in which he claimed the Bank "tried, but should have tried harder" to persuade everyone of the need to recapitalise the banks.

In the speech he made a veiled attack on Labour and the FSA, revealing that he had pushed for a major recapitalisation in early 2008 but was rejected because "it wasn't a popular message".

He also criticised Britain's banks for causing the crisis and warned that urgent reform was needed to spare "our grandchildren" a similar fate.

Sir Mervyn King: 'Why did the Bank not do more to prevent the disaster? We should have. We should have shouted from the rooftops... We should have tried harder.' (Photo: Bloomberg News)

"We don't build nuclear power stations in densely populated areas, nor should we allow essential banking services and risky investment banking activities to be carried out in the same 'too important to fail' bank. It is vital that Parliament legislates to enact these proposals sooner rather than later," said Sir Mervyn.

"With the benefit of hindsight, we should have shouted from the rooftops that a system had been built in which banks were too important to fail, that banks had grown too quickly and borrowed too much, and that so-called 'light-touch' regulation hadn't prevented any of this."

But this morning he distanced himself from these comments and said that his "main point was not to try and blame anyone... this was the failure of a system" and reiterated his admission that the Bank of England had a "share of responsibility in going along with a system that failed".

"I had talked many times over the previous 10 years that we were building up a trade deficit... and at some point this would have to come to an end. We were certainly late to the game in terms of understanding the scale of the fragilities in the banking system... but we were in good company," he said.

"The important thing is that you learn the lessons and we've done that. I don't think any central bank or finance ministry or regulator feels that they came out well from this, because something very wrong happened, and I think that's clear. We've learned more lessons than most other countries."

David Blanchflower, a former member of the Bank of England's Monetary Policy Committee, accused Sir Mervyn of being "disingenuous".

"If Mervyn King had thought more regulation was important he could've done something about it. And because he didn't, he must take responsibility for the fact the Bank of England missed the biggest financial crisis in a century," he told BBC Radio 5 live.